TRADE NOTICE : 135 / 2003                                                                                           Dated: 7.10.2003


        Sub:  Fixation  of  brand  rate  of  duty drawback  by the  Central Excise  field  formations under  Rules  6  and  7  of the  Customs  and  Central Excise  Duties  Drawback  Rules, 1995 -  Removal  of difficulties – Regarding.


             Copy of   Board’s  Circular No. 83 / 2003 – Cusdated: 18.9.2003 (F. No. 603/32/2003-DBK) is  communicated herewith.


 The contents of the Trade Notice may be brought to the knowledge  of all  constituent members of Trade Associations / Chamber of Commerce.


          (Issued from file C.NO.IV/16/4/2003-C.Ex.Pol )



//ATTESTED//                                                           (D.P. NAIDU)





As per mailing list   I / II / III  /  All  Sections in Hqrs., Trichy.


Copy of   Board’s  Circular No. 83 / 2003 – Cusdated: 18.9.2003

Sub:  Fixation  of  brand  rate  of  duty drawback  by the  Central Excise  field  formations under  Rules  6  and  7  of  the  Customs  and  Central Excise  Duties  Drawback  Rules, 1995 -  Removal  of difficulties – Regarding.

            Attention is  invited  to  revised  Customs  and  Central  Excise  Duties  Drawback  Rules, 1995,  as amended  by  Notification No.20/2003-Cus(N.T.)  dated  3.3.2003.  

2.      The fixation of duty drawback under Rule 6  (i.e. Brand Rate) in respect of those export products which do not figure in the All Industry Rate of Drawback Table or under Rule 7 (Special Brand Rate) where the   exporters  apply for such  fixation  on account  of  inadequate  rebate of  input  stage duties through  All Industry  Rate,  was earlier  centralised  in the  Ministry.  However,  as  a  measure of  decentralisation and  trade  facilitation,  the  powers for fixation  of  brand rate and  special  brand rate have been  delegated  to the  jurisdictional  Commissionerates  of  Central Excise through  the amended  Duty Drawback Rules.  For  the convenience of the field formations and  for the  guidance  of  the trade,  a comprehensive Customs Circular  No.14/2003 had been  issued  on 6th  of March, 2003.  As  a result,  brand  rates/special brand rates  for  duty drawback  are  now  being  fixed  by  the  Central Excise Commissionerates on the  basis of  the  applications filed  by the  exporters.  Though  the  new  system  has been  in  place for  past  five  months,   some confusion  persists  in the  minds of  field formations  as well as  trade in regard to  certain areas. 

3.      The  following  issues raised  by  the  field  formations and the  trade   have  been  examined in detail in the  Board:-   

(a)    Applicability  of  All Industry  Rates of duty  drawback  in brand  rates  of  duty  drawback. 

(i)      It  has been  brought to the notice  of  the  Board  that  in respect  of  leather  articles including  footwear, etc., the exporters  have  not  been furnishing  duty paying documents  in respect of finished/lining  leather.  As  a result  the field formations  are  not  factoring  the  duty  drawback  on account of finished leather/lining  leather into the total brand rate.  

It  is clarified  that  both  finished leather as well as  lining  leather are  exempt  from the  Central Excise  levy.   However, it is to be  borne  in  mind  that  various inputs  in the  nature of  finishing  chemicals, penetrating  agents, wattle  extracts  and  leather  dyes & auxiliaries are used  in the  finishing of raw hides.  Therefore, the  duties on these  inputs  remain  unrelieved  as  leather (finished/lining)  is not subject to the  Central  Excise  levy.  Therefore,  it has  been  the  practice  to  factor  the  All Industry  Rate of  duty drawback  available  on finished/lining  leather  into  the  total  duty  drawback  rate  while  calculating the  drawback  rate for  export  products manufactured  from  finished/lining  leather.  Field formations  are,  therefore,  advised  that  while  computing  the brand  rate of drawback for leather  articles  including  footwear,  the  All Industry  Rate  available  on  finished/lining  leather  may be  considered  on the consumption  of  finished/lining  leather in the  export  product.   


Supposing,  the  leather  product  exported  is ready-made garment.   It   involved   predominant  usage  of  indigenous finished  leather, imported synthetic lining material,  duty  paid  imported  zippers and  metallic buttons.  In this case,  in respect of  the  imported  materials,  the  exporter  would be required  to produce duty  paying bills  of entry,  evidencing  the  Customs  duty  incidence suffered  on these  inputs.   Duty  incidence on these inputs  on the  materials  consumed  ( after allowing  normal  wastage) shall be  reckoned   for the  purposes of  calculating  duty  drawback  on  these  inputs.    However,   as  regards  finished  leather,  the exporter would  be  required  to  furnish  an  invoice  indicating  the  local  price  of  indigenous  finished leather  procured.   Duty  drawback  element  on this  leather  shall be  calculated  @ 6% of  value, subject  to  a  maximum of  Rs.4.00  per  sq. ft.  as  provided  in  SS  No.41.02 of  the  Duty  Drawback  Table, 2003-2004.  If  the  local  invoices  show  procurement of  finished leather @ Rs.60.00 per sq. ft. then  the  duty  drawback  element on this component  shall be restricted to  Rs.3.60 per  sq. ft.  However,  if  the drawback amount  computed  comes to  more  than Rs.4.00 per  sq. ft.,  the  same  shall be  restricted  as  per  the  drawback  cap available.      

(ii)    Similarly,  in the case of  complete  bicycle,  manufactured  by  using  various  cycle  parts  and  also  certain  other  accessories/parts,   not  listed  under SS No.87.44 of  the  Duty  Drawback,  the  brand  rate could be allowed  in respect of such  extra  parts/accessories,  provided that   these parts/accessories  are  procured  on  payment  of  duty  and  not imported  duty  free  under Advance Licence/DFRC/DEPB  Schemes.  


          For  example,  an  exporter  exports  a  complete  bicycle with  certain  accessories,  i.e.,  indigenous seat  cover,  imported headlight, indigenous front  basket,  bicycle bell (SS  No. 87.52), bicycle stand (SS  No. 87.106),  carrier(SS  No. 87.63)  and  freewheel  multi-speed (SS  No. 87.112).   

          Brand rate of  drawback  in this  case  should be calculated by  including  following  components:-  

·         All Industry  Rate of  duty  drawback  appearing  at  SS  No.87.44,  

·         All Industry  Rates of  duty  drawback  for  various  accessories appearing  in the Duty Drawback  Table, in respect of which  the  exporter  proves  the  usage of  these  accessories  but  does not  furnish  any  duty paying  documents,  i.e., bicycle bell (SS  No. 87.52), bicycle stand (SS  No. 87.106),  carrier(SS  No. 87.63)  and  freewheel  multi-speed (SS  No. 87.112).  

·         Central  Excise  duty paid invoices  as  regards  indigenous  seat  cover and  indigenous  front basket.  

·         Duty paid  bill of  entry  in case of  imported  headlight.  

(b)     Calculation  of  brand  rate of  duty  drawback  for  complete  buses  by the field formations. 

It  is clarified  that  since 1988,  there  has been  the  practice  in the Ministry for factoring  a  component  of  7%  of the cost of  bus body  as  duty  drawback  on bus body,  into the total  brand  rate  fixed  for the complete  buses.  This percentage has been arrived  at  after averaging  the data furnished  by  certain  established  bus body builders  and  the same has been  approved  by the officers of  the  Comptroller  and  Auditor  General  of India.  Therefore,  the field formations  should continue  the same practice  while fixing  brand  rate of  duty drawback for complete buses.  This  component  purely has  the  Central Excise duty  incidence  and  hence  should  be  allocated  accordingly.  


          An exporter  exports  a complete  bus.  The  Chassis  portion  of the bus  has  been  manufactured  by  using  various  parts, components,  compressor for  air-conditioner.  The  details as  regards  the  duty  incidence  suffered on various inputs is  provided  in  DBK-II and  IIA supported  by  duty  paying bills  of entry.  The  exporter  avails  Cenvat on the  countervailing duty suffered  on  all the imported  inputs and  claims  only  the  Customs  duty  incidence on account of  basic  Customs duty and  Special  Additional  Duty (SAD) on the same.   For  the  sake of illustration,  this duty incidence  is shown as  Rs.31,561.00.  

          As  regards bus  body,  the  same is  got  manufactured  from  the  bus body  builder and  the  exporter produces  an  invoice  from  the  bus  body  builder indicating  the cost of  the bus body.  Let  us  say,  in this  case,  the cost of  the body  building  is Rs.3,90,000.00. The duty drawback  on account of  body  building  shall be allowed  @ 7%,  i.e., Rs.27,300.00.   

          The  exporter  would be  eligible  for  total  drawback  rate  of  Rs.58,861.00, i.e., 31,561.00 (Customs allocation) + Rs.27,300.00 (Central Excise  allocation).  

( c)   Fixation and  approval of  brand  rate  of  duty drawback  as laid  down  in para  3(d)(i) of  Circular  No.14 /2003 vis-à-vis  the  provision of post-audit  prescribed  in para  3(d)(ix). 

The  function of the post-audit  is  to  safeguard  the revenue  by  pointing out  errors  whether  in the nature of  calculation  mistake  or  wrong  application  of  rules/regulations, etc.  Based  on the same,  the  Commissioner  of  Central  Excise  and the officers  under  his control  have  been  invested  with powers  to  rectify  such  mistakes  through  issuance  of  any  amendment, addendum or corrigendum  to the  brand  rate  letters  issued.  However,   as a matter  of  further  decentralisation,  for the convenience  of the  trade  and  for speedier issuance  of  the  brand rate letters,  it  has  been  decided  that  proposals  for fixation  of  brand rate involving  duty  drawback  of  more than Rs.5 lacs,   shall be approved  by  the  Additional/Joint  Commissioner  of  Central Excise  without  any  limit.  In  other words,  no  proposal  for  fixation  of brand  rate of drawback shall be submitted  to  the  Commissioner  of Central Excise  for approval. 

(d)    Scope of rules 6(3) and  7(4) of  the  Customs  and Central Excise Duties  Drawback Rules, 1995. 

It  is clarified that the  powers  of  Ministry  expounded  in rules  6(3) and  7(4)  of the  Customs and Central Excise  Duties  Drawback  Rules, 1995 are envisaged to be  exercised on rare  occasions.  Only  in those cases,  where the Ministry  gets  the information through some complaints or pursuant  to an  investigation  that  the drawback  rate  has been  incorrectly determined or the rate letter  has been  improperly or irregularly issued,  the Ministry, in such cases,   shall   suo moto  proceed to revoke the rate letters  in question and order   recovery  of  duty drawback amount.   

S.S. Renjhen
Joint  Secretary to the  Government of  India